Pakistan’s technology exports grew 21% year-on-year in the first ten months of FY26, reaching $3.81 billion. April 2026 alone generated $423 million, up 33% from the same month last year. The $10 billion export target under Uraan Pakistan by FY29 is ambitious but not implausible, provided the structural conditions supporting this growth are reinforced, not undermined, by the budget presented on June 10.
The risk is real. Despite strong export momentum, Pakistan’s digital economy faces infrastructure bottlenecks, fiscal uncertainty, underfunded government IT projects, and a talent pipeline that is growing in volume but not yet in the skills categories global enterprise clients are buying. P@SHA, the Pakistan Software Houses Association, has submitted detailed budget recommendations. The Ministry of IT has proposed a Rs. 71.84 billion PSDP allocation. The SME AI fund proposal sits at Rs. 3 billion. Whether these proposals survive Finance Ministry and IMF negotiations will determine whether FY27 accelerates the digital economy or forces it to coast on existing momentum.
Here is what the budget must get right.
1. Cut the Mobile Taxes That Are Throttling Digital Inclusion
A 15% advance tax and 19.5% GST on mobile users is among the highest combined mobile tax burden in the region
Pakistan taxes mobile phone use more heavily than almost any comparable market in Asia. The 15% advance income tax and 19.5% General Sales Tax levied on mobile users combine to make mobile and broadband services materially more expensive than in India, Bangladesh, or Indonesia. The Ministry of IT has formally recommended reducing both levies. The telecom sector has separately requested a reduction of the withholding tax on telecom operators from 6% to 4%.
The case for cuts is not just equity. Every percentage point of mobile penetration adds measurable economic activity: digital payments, e-commerce transactions, remote work, and access to government services all scale with connectivity. Pakistan’s current tax burden on the sector is a structural drag on the digital economy it is trying to build. Budget 2026-27 is the moment to correct it.
2. Fund the Islamabad IT Park Fully and Put Karachi on a Recovery Plan
One IT Park is 72% complete after years of delays. The other is at 10%.
The Islamabad IT Park, Pakistan’s flagship technology infrastructure project, is 72% physically complete and requires Rs. 6.73 billion in FY27 to reach completion. Once operational, it is projected to generate over 5,000 direct and indirect jobs and serve as a platform for scaling IT exports. The Ministry of IT has requested this allocation in its PSDP submission. The budget must deliver it: a 72%-complete building that stalls at the finish line due to inadequate funding is both a fiscal waste and an infrastructure credibility failure.
The Karachi IT Park is a more urgent problem. At 10% physical completion and 5% financial utilisation against a total project cost of Rs. 31.2 billion, the project is effectively stranded. A rs. 11.5 million allocation in FY27, as currently requested, will not move it materially forward. The budget should either fund the Karachi project at a level that produces real progress, or restructure it to reflect what is actually achievable.
3. Launch the Rs. 3 Billion AI Adoption Fund with Enforceable Accountability Metrics
600 SME AI deployments, 40% matching grants, and third-party audit requirements: the design is credible. The execution risk is real.
The proposed Rs. 3 billion National AI Adoption Fund is the most directly impactful digital economy proposal in the FY27 budget discussions. Its design is credible: matching grants of up to 40% of verified AI implementation costs, capped at Rs. 5 million per firm, available only to PSEB-registered technology vendors, with third-party audit certification and 12-month impact reporting required from beneficiary SMEs. The governance structure includes representatives from MoITT, the State Bank, P@SHA, and independent experts.
The risk is not design failure but implementation failure. Pakistan has a history of technology programmes that are well-structured on paper and under-resourced in delivery. The fund should be launched with an independent programme management unit, a public dashboard tracking disbursements and reported outcomes, and a midpoint evaluation built into the mandate. Without these, the Rs. 3 billion risks becoming another budget line that generates press releases but limited measurable AI adoption.
4. Give the IT Sector a 10-Year Fiscal Framework It Can Actually Plan Against
Pakistan’s IT sector cannot invest in talent and infrastructure when the tax rules change every budget cycle
P@SHA’s top budget recommendation is not a specific tax cut. It is a 10-year fiscal framework that gives the IT and IT-enabled services sector predictability. The specific request includes a commitment that the existing income tax exemptions and export incentives for IT firms will not be arbitrarily modified mid-cycle, that Roshan Digital Accounts will be extended to IT services exporters for payroll and operational purposes, and that the regulatory environment will be stable enough for firms to make five-to-ten-year investment decisions in talent, infrastructure, and market access.
This recommendation is harder to legislate than a single tax rate change, but it is structurally more important. Pakistani IT firms that export services and want to invest in AI capability, hire senior engineers, or set up development centres are making multi-year bets. They will only make those bets if they can model their cost base with reasonable confidence. A budget provision signalling a 10-year fiscal commitment, even in principle, is worth more to the sector than a one-year tax holiday.
5. Invest in Broadband Infrastructure Beyond the Four Major Cities
IT export growth is concentrated in Karachi, Lahore, Islamabad, and Rawalpindi. Remote work potential outside these cities is largely untapped.
Pakistan’s IT export growth story is, to a significant degree, a Karachi-Lahore-Islamabad story. Broadband reliability, latency, and availability outside these urban centres remains a constraint on where IT services firms can locate, where remote workers can effectively operate, and where the SME AI adoption fund’s benefits can realistically be captured. The Special Communications Organisation has requested Rs. 2.67 billion for connectivity projects including 32 new cellular sites in underserved areas. This is directionally correct but insufficient at scale.
The budget needs to signal a credible multi-year investment in fiberization, subsea cable capacity (Pakistan’s digital traffic routes through a limited number of undersea cable landing points), and rural broadband infrastructure. Without this, Pakistan’s digital economy remains geographically constrained to a few urban nodes, regardless of how many MoUs it signs or how many AI skills programmes it launches.
6. Shift Skills Investment from Basic IT to High-Value AI, Cloud, and Cybersecurity
Pakistan produces IT graduates at volume. The global market is buying AI architects, cloud engineers, and cybersecurity specialists.
Pakistan’s IT export growth has been strong in volume terms, but the country remains heavily weighted toward business process outsourcing, web development, and lower-complexity IT services. Moving from $3.81 billion to $10 billion in exports by FY29 requires a category shift, not just a volume increase. The categories global enterprise clients are procuring: AI integration, cloud architecture, data engineering, and cybersecurity, require skills that are systematically underrepresented in Pakistan’s current talent output.
The MoUs signed with Alibaba, Huawei, ZTE, Baidu, and others all include skills development components. The budget should financially backstop these commitments with direct support for AI and cybersecurity curriculum reform, industry-academia alignment programmes, and subsidised certification pathways in high-demand global technology categories. Quantity of graduates is not the bottleneck. Quality and specialisation are.
7. Get the Crypto Regulatory Framework Budget Right to Avoid Creating a Tax Without a Market
The Virtual Assets Act 2026 created PVARA. The budget must fund it adequately and not tax crypto before the infrastructure to enforce fair taxation exists.
Pakistan passed the Virtual Assets Act 2026 in March 2026 and is expected to introduce a 15-30% capital gains tax on cryptocurrency in the upcoming budget. The sequencing is correct in principle: regulate, then tax. But the risk is that the CGT arrives before PVARA’s licensing infrastructure is operational enough to support fair and comprehensive enforcement, which would mean the tax falls disproportionately on compliant licensed exchange users while P2P traders operate outside it.
The budget must fund PVARA’s operational build-out adequately, ensure the CGT’s implementation mechanics (reporting requirements, audit triggers, holding-period rules) are designed to create compliance incentives rather than just compliance penalties, and give licensed exchanges a clear timeline for full operational status. A well-designed crypto tax framework that brings 20 to 30 million users into a structured relationship with the FBR is a significant revenue and formalisation win. A poorly implemented one drives volume back to unlicensed platforms and produces neither revenue nor market development.
What This Means
Pakistan’s digital economy is growing. The question the June 10 budget answers is whether the government is serious about the conditions required to sustain that growth: mobile affordability, infrastructure completion, fiscal certainty, talent investment, and a regulatory environment that invites rather than fragments. Each of the seven items on this list has a specific proposal already in the system. The budget is not an ideation exercise. It is a prioritisation decision. The gap between Pakistan’s digital ambitions and its digital reality is not a vision problem. It is a budget problem.
